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MCA mandates issue & transfer of shares in dematerialised form only

11.09.2018

The Ministry of Corporate Affairs (MCA) has notified that with effect from 2nd October, 2018, issue of further shares and transfer of all shares by unlisted public companies shall be in dematerialised form only. In order to enhance transparency, investor protection and governance in the corporate sector and further to curb menace of black money, the Ministry has taken this decision. Rules under the Companies Act, 2013, would be amended with respect to having shares in the demat form accordingly. The Ministry is primarily concerned with administration of the Companies Act 2013, the Companies Act 1956, the Limited Liability Partnership Act, 2008 & other allied Acts and rules & regulations framed there-under mainly for regulating the functioning of the corporate sector in accordance with law.

According to the MCA, the major benefits of dematerialisation of securities which will now be available to unlisted Public companies includes elimination of risks associated with physical certificates such as loss, theft, mutilation, fraud etc. Improvement of corporate governance system by increasing transparency and preventing mal-practices such as benami shareholding, back dated issuance of shares, etc. Unlisted Public companies would be exempted from payment of stamp duty on transfer. There would be Ease in transfer, pledge etc. of securities. Further, it would also strengthen the Know Your Client (KYC) framework for unlisted companies and prevents instances such as pledging of duplicate shares.

As per the reports, Unlisted Public Companies are expected to facilitate the dematerialisation of their securities in co-ordination with Depositories and Share Transfer Agents. Any grievances arising out of such Dematerialization of securities will be handled by the Investor Education and Protection Fund (IEPF). Authority looks after investors’ awareness and protects interests of investors. The measure is expected to significantly enhance the Corporate Governance standards in the country.

Tags : Shares Demat form Mandatory

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